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Over the long run, worldwide supplies of agriculture products have increased dramatically, but at the same time, farmers revConsider a local Sunday farmers market. Joe, a farmer, packs his small truck full of green peppers every Sunday morning and

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Answer #1

Option A is correct. Because the demand is inelastic, when the supply curve shifts to the right, the decline in the price is more, in percentage, then increase in quantity supplied. The resultant change in revenue is therefore negative because price fall is greater than quantity increase. Also note that when demand is inelastic, revenue decreases with the decrease in price

Option B is correct. Because it is not efficient for Joe to return with any leftover peppers, he must be willing to sell the entire lot at any market price offered. Due to this reason the supply curve will be perfectly elastic or horizontal.

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